A fixed deposit is a fixed-income savings tool. It allows you to park your funds into a channel that can offer you secure and stable returns. This is because the FD interest rates decided at the beginning remain the same until maturity. Fixed deposits aren’t impacted by market volatilities.
Hence, it is very easy to estimate the kind of returns they could earn from this savings option. All you must do is club deposit values, interest rates, and tenors ideal for you into a neat simple or compounding formula. However, you need not do this calculation manually. You can use an FD calculator to make the process easier and quicker.
What is an FD Calculator?
An FD calculator is a financial tool that you can easily find online. Various websites offer this component in order to make your FD journey smooth and rewarding. This tool mostly contributes to your FD plan.
Your plan could include key components like a deposit amount, interest rate, tenor, and FD type. Similarly, an FD calculator considers all these factors when computing a maturity amount. This maturity amount is calculated by adding interest returns to your initial deposit amount.
The interest returns depend on your chosen tenor and the prevailing interest rate. With all these factors combined, an FD calculator produces estimates of the future of your FD in the form of a maturity value.
How to Use an FD Calculator?
Using an FD calculator is astonishingly simple. Not much effort is required and within seconds, you have an estimated maturity amount. Here’s how you can calculate your FD maturity amount using an FD calculator.
Step 1
Visit an FD calculator page.
Step 2
Enter your desired deposit amount into the calculator.
Step 3
Choose an interest rate and tenor.
Step 4
Click on a ‘Calculate Now’ or similar button, if present, and find your maturity amount along with estimated interest returns on your screen.
Factors that Affect FD Calculations
Given below are the factors that impact FD calculations, when carried out manually or online.
Deposit Amount
The deposit amount refers to the initial amount that you park into an FD. It is this amount which interest returns are added to. Together, they formulate the maturity amount that an FD calculator primarily computes.
Rate of Interest
When a bank or NBFC uses your money from an FD, they pay you an interest, much like a borrower does in case of a loan. This interest amount is calculated with the help of an interest rate. Hence, the interest rate is an important variable in the calculation of an FD maturity amount.
Tenor
A tenor refers to the time for which you save your money in an FD. The interest rate and tenor together decide how much interest return shall be added to your deposit amount. Over time, the interest return will increase and, once added with your deposit amount, could be very beneficial for your goals.
Type of FD
The frequency at which you’d like to receive your interest returns is the basis of the types of FDs. You will find cumulative and non-cumulative FDs on the market. Cumulative FDs offer you a collective interest return during maturity. Non-cumulative FDs offer you interest returns at a decided interval of a month, a quarter, 6 months, or a year.
Calculation Examples
- Simple Formula:
M = P + (P x r x t/100)
Here, M = Maturity Amount
P = Principle Amount (Deposit Amount)
r = Rate of Interest
t = Tenor
For instance, P = ₹10,00,000
r = 10%
t = 10 years
Hence, M = 10,00,000 + (10,00,000 x 10 x 10/100)
M = 10,00,000 + 10,00,000
M = ₹20,00,000
- Compounding Formula:
M = P + P [(1 + r/100)^(t) - 1]
For instance, P = ₹10,00,000
r = 10%
t = 1 year
M = 10,00,000 + 10,00,000 [(1 + 10/10)^(1) - 1)
Therefore, M = ₹11,00,000
Conclusion
The biggest perk of using an FD calculator lies in the fact that it is extremely easy to use. All you need to complete is 3 to 5 steps and et voila! You have your FD calculations taken care of! Moreover, it contributes greatly to your overall financial planning. An FD calculator helps you stay prepared for the future since it offers you maturity rates of a very secure investment type.
Additionally, FD calculators are entirely free and can be used as many times as you’d liked. In this way, your comparison and analysis process can be a detailed one, leaving you with a fool-proof financial plan. Along with this, you will also find yourself planning your current budget very easily, knowing exactly which deposit amount can bring you your desired interest returns. Hence, FD calculators truly are the best friend of every individual.
